Securities class actions, and to a somewhat lesser extent shareholder derivative litigation, have historically presented the largest class of claims exposures to directors and officers liability insurers.
Defense expenditures frequently exceed $1 million in these litigations that are not subject to an early dismissal or settlement, and often extend into the tens of millions of dollars in the more protracted actions. In the so-called "mega cases," such as Enron, defense expenses have even topped the $100 million–a threat to exhaust most, if not all, available excess layers in a typical tower of insurance.
There is little in the way of hard data in this area, but it is not unusual for something in the range of 15-to-20 percent of D&O insurance loss dollars spent in securities litigation to be attributed to defense expenses. In the Enron situation, over 35 percent of the available D&O limits were exhausted by defense payments.
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